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2003 & Beyond: EU Ends Year In Deep Crisis, With Tough Times Sure To Continue

The European Union will begin 2004 under a cloud of uncertainty. Analysts predict the recent breakdown of constitutional talks, exacerbated by worsening political divisions on a number of other issues, leaves the bloc ill-prepared for the road ahead.

Brussels, 19 December 2003 (RFE/RL) -- Rarely has the European Union faced more testing times.

On 1 May, it will take in 10 new members, whose accommodation is no easy matter. Although most of the policy issues were resolved in the course of the accession talks that concluded a year ago, the new members must now be integrated into the EU's structures.

And those structures themselves are in flux. Although the constitution talks failed last week, the incoming Irish presidency has said it will continue consultations. Meanwhile, the European Parliament will hold elections in June, as will Spain, one of the sources of recent tensions. To complicate matters further, the European Commission will step down in October.

What makes the challenges in 2004 particularly daunting is the fact that the EU is ending the year in deep crisis.

Earlier this month, the bloc's leaders failed to agree on a first-ever EU constitution, with Poland and Spain blocking agreement with Germany and France over voting rights.

The EU's Growth and Stability Pact came under strain earlier this autumn when Germany and France managed to fend off sanctions for excessive budget deficits in exchange for vague promises to put things in order.

In September, the ambitions of the eurozone suffered a blow when Sweden rejected membership in a referendum.

And, of course, the EU is still reeling from the deep divisions caused by the war in Iraq.

Kirsty Hughes, a senior analyst with the Brussels-based Centre for European Policy Studies (CEPS), says the failure of constitution talks especially is a very bad omen.

"I think in particular it means that when the EU enlarges in May 2004, first of all there's going to be an extremely bad political mood. Instead of a lot of goodwill to see how this thing is going to work, there's actually going to be very bad and perhaps even bitter political will among the 25. And even beyond that question of political mood, if you like, what the summit has shown is that it is very difficult to agree important issues at 25. So that's also a bad omen for the future. There's lots of things on the EU's table. It's got its budget deal to work out. But there's also everything that's going on in the wider world -- there's the Iraq reconstruction, the trans-Atlantic relations -- a lot of different things that the EU at 25 needs to be able to deal with," Hughes said.

Although the constitutional talks will continue, they are likely to be eclipsed by and entangled in the discussions of the EU's next budget, for 2007 to 2013. The European Commission, together with the Irish presidency, will launch budget preparations in January, but six net contributors -- Germany, France, Britain, Austria, Sweden, and the Netherlands -- have already fired a warning shot, asking for the next budget to be capped at 1 percent of the EU's gross national product. This would mean that the EU of 25 or more members would have to make do with the same -- or possibly less -- money than now.

Hughes notes a sharp increase in countries putting short-term national interests before the long-term interests of the EU. She argues that the dual-majority voting system, which Poland and Spain scuppered, would have been a big step forward.

Hughes predicts the recent call from Germany and France to set up a "core group" of countries supporting faster political integration will not be easy to put into practice. She says there are various tensions pulling the EU in different directions.

"I think at one level there is a strong political dynamic that says if this isn't going to work at 25, we're going to have to move forward in a smaller group, that there's enough countries concerned to carry on trying to create a strong political Europe, and not just some sort of enlarged free-trade zone," she said. "That if they can't do it at 25, they'll try and do it in a smaller group. We already saw that in April this year with this suggestion for a core group on defense, which of course by this autumn already got accepted by Britain. But that also now falls foul of the summit's breakdown."

The problem, however, is that it is unclear who the "core group" countries would be and which policies they propose to pursue.

Hughes notes that, in a sense, a "two-speed Europe" will already be a fact after enlargement next year. The new members will have to wait at least a few years before they can join the euro or the border-free Schengen area.

She says the credibility of the likely Franco-German engine of a "core group" was damaged earlier this year when the two nations escaped sanctions envisaged under the euro rules for excessive budget deficits.

At the same time, it bears noting that the decision to let Germany and France off with a warning was supported by a majority of member states. Hughes says the antagonism displayed by the new member states toward Germany and France -- at a time when the EU clearly needs leadership -- is another worrying sign.

Another CEPS analyst, Michael Emerson, says the recent summit stand-off shows that the settling down of an EU of 25 members is going to take time, while the outcome remains uncertain.

This, he says, will most probably mean that the bloc's drive to engage its new neighbors -- the so-called Wider Europe initiative launched by the European Commission last summer -- could be put on hold in 2004. "Recent tendencies are warning signals that the EU may have less political energy and, indeed, resources for strongly developing the Wider Europe policy than might otherwise have been the case, certainly in terms of political energies," he said.

Emerson says the little political energy the constitutionally challenged EU can spare next year will mostly be absorbed by Turkey. The EU will need to decide by December 2004 whether Turkey is ready to start accession talks. Emerson says this is bad news for other EU aspirants.

"The Wider Europe business, which is itself extremely complex, would require a very high level of political energy and focus to really get it going," he said. "And so the chances are, in this case, that for the year 2004 it remains rather token activity."

Emerson predicts that in 2004, the EU's relationship with Russia will concentrate on sorting out known problems rather than witness a strategic overhaul. He says Russia's efforts to join the World Trade Organization, and its ambivalent attitude toward ratifying the Kyoto Protocol on greenhouse gases, will be the two big items on the agenda.

Russia's professed unwillingness to automatically extend the present Partnership and Cooperation Agreement with the EU to its new members could easily become a third major issue.